Tue, Jun. 23, 9:28 AM
- JPMorgan has downgraded Western Digital (NASDAQ:WDC) to Neutral, and cut its target by $13 to $92.
- WDC -1% premarket to $90.70. JPMorgan is only 2 months removed from launching coverage on Western at Overweight, arguing the company's cash balance, flash storage assets, and potential to get regulatory clearance to integrate Hitachi's former hard drive ops make it a better investment than Seagate.
Thu, May 28, 9:49 AM
- Believing its current valuation doesn't take into account strong enterprise/cloud demand, Goldman's Bill Shope has upgraded Western Digital (NASDAQ:WDC) to Buy, and hiked his target by $16 to $122. As is often the case, Seagate (NASDAQ:STX) is going in the same direction as Western.
- Shope: "We estimate that PCs will represent 38% of Western Digital's revenue in CY2015, down from nearly 70% in CY2007. As a result, PC volatility is not nearly as big of a driver of fundamentals as it once was." He forecasts PC-related shipments (hurt by both soft PC sales and SSD encroachment) will see a -9% CAGR from 2014-2016, and that enterprise shipments (lifted by cloud/analytics demand and Western's flash storage offerings) will see an 8% CAGR.
- Western currently trades for 12x estimated FY16 (ends June '16) EPS. Seagate goes for 11x estimated FY16 (ends June '16) EPS.
Tue, May 19, 12:11 PM
- FBR's Chris Rolland, after talking with Intel (INTC -1.2%) IR chief Gary Willihganz: "While excess PC inventory dynamics were well known exiting 2014, we believe many investors did not expect additional PC inventory drain into the Win10 release. Intel was careful to explain these nuanced inventory dynamics, which we believe may have also been a contributor to the weaker-than-expected ODM shipments witnessed in April."
- Rolland adds that while Intel "expects inventory replenishment in 2H15 around the Win10 release, it was careful to temper expectations for a surged uptick in demand." A Q1 CC remark from AMD CEO Lisa Su suggested Windows 10 (NASDAQ:MSFT), whose Start menu and enterprise-friendly features could help boost industry demand, will launch in late July.
- Also: Morgan Stanley says it's cautious on PC names in the near-term (moreso on chipmakers than other firms) given soft Q2 PC/hard drive inventory builds and weak April sales from ODMs. It sees normal seasonal growth following a rough Q1, and doesn't expect a recovery occurring before Q3.
- Micron (MU -2.1%), Seagate (STX -3.3%), and Western Digital (WDC -1.5%) are lower on a day the Nasdaq is near breakeven. Micron, which is close to its 52-week low, fell on Friday after Nomura cut estimates on PC DRAM pricing fears. Microsoft is down 0.7% after factoring its dividend payment (shares are trading ex-dividend today).
Tue, May 5, 11:46 PM
Tue, Apr. 28, 6:33 PM
- In addition to missing FQ3 estimates, Western Digital (NASDAQ:WDC) has guided on its CC for FQ4 revenue of $3.3B-$3.4B and EPS of $1.50-$1.60, below a consensus of $3.64B and $1.92. Not surprisingly, much of the blame is placed on weak PC sales.
- FQ3 gross margin (non-GAAP) was 30.1%, down 40 bps Q/Q and flat Y/Y. Western has set a broad FQ4 GM guidance range of 27%-32%. Operating expenses fell 2% Y/Y to $591M, and $240M was spent on buybacks.
- Desktop hard drive shipments fell by 3.1M Y/Y to 13.5M, and notebook drives by 3M to 18.8M. Enterprise drives (high-margin, lifted by Web/cloud demand) rose by 400K to 7.5M; branded drives (also high-margin) fell by 100K to 6.1M; consumer electronics drives rose fractionally to 8.6M.
- Western estimates the total addressable market (TAM) for hard drives fell to 125M from FQ2's 140.8M and the year-ago period's 138.1M. 60% of revenue came from non-PC products, up from 53% a year ago. Enterprise SSD revenue rose to $224M from FQ2's $187M and the year-ago period's $134M.
- Shares have fallen to $94.50 AH. Seagate provided light guidance 11 days ago.
- FQ3 results, PR, datasheet (.pdf)
Tue, Apr. 28, 4:17 PM
Fri, Apr. 17, 11:00 AM
- In addition to missing FQ3 revenue estimates (while beating on EPS), Seagate (NASDAQ:STX) has guided on its CC (webcast) for FQ4 revenue of $3.2B-$3.3B, below a $3.42B consensus. However, a light outlook was expected given the PC industry's recent woes. Demand is expected to pick up in 2H15 thanks to higher PC/console sales and continued enterprise/cloud strength.
- $706M was spent on buybacks in FQ3, helping EPS beat estimates in spite of a revenue miss. Also: Gross margin was 28.9%, +70 bps Q/Q and +40 bps Y/Y, and above guidance of 28.5%. While revenue fell 2% Y/Y, operating expenses rose 18% to $555M, thanks to both higher R&D and marketing/admin spend.
- Boosting margins: Shipments of enterprise drives (higher-margin) rose 18% to 9.1M thanks to a server upgrade cycle and Web/cloud demand. PC drive shipments fell 14% to 31.1M, with plunging desktop volumes offsetting slight notebook growth. Consumer drives -11% to 4.8M; branded drives -14% to 5.1M. Hard drive ASP rose $1 Q/Q and Y/Y to $62.
- Western Digital (NASDAQ:WDC) is following Seagate higher ahead of its April 28 FQ3 report. The gains come in in spite of a 1.5% drop for the Nasdaq. BofA's upgrades are looking good for now.
- Seagate's FQ3 results, PR, earnings slides (.pdf)
Tue, Apr. 14, 9:37 AM
- Believing PC weakness is priced in and valuations are low, BofA/Merrill has upgraded Seagate (STX +0.8%) to Neutral and Western Digital (WDC +1.1%) to Buy ahead of the companies' calendar Q1 reports (set for April 17 and 28, respectively).
- BofA thinks pricing is holding up well in spite of PC-driven unit weakness, and that a mix shift towards higher-margin enterprise drives (fueled by Web/cloud demand) is propping up both ASPs and gross margins.
- Nonetheless, the firm is respectively cutting its Q1 and Q2 hard drive market shipment (NYSE:TAM) forecasts by 4M and 3M to 126M and 129M - Seagate/Western's Q1 forecast is at 135M - and its 2015 TAM forecast by 9M to 525M. Estimates for both firms have been moderately cut.
- Regarding Western, BofA argues the company's strong SSD presence (made possible by a string of acquisitions) "ensures that the cannibalization of performance drives [by SSDs] is not a significant net negative."
- The upgrades come a day after Brean reiterated Buy ratings on Seagate/Western (while cutting estimates), and Jefferies added Western to its Franchise Pick list; like BofA, Jefferies cited the demand/ASP boost provided by high-capacity cloud drives, and argued PC issues are priced in.
Thu, Apr. 9, 6:03 PM
- As Intel's (NASDAQ:INTC) March 12 warning led many to expect, PC sales were weak in Q1: IDC estimates shipments fell 6.7% Y/Y to 68.5M, a much sharper drop than Q4's 2.4% and Q3/Q2's 1.7%. Gartner estimates shipments fell 5.2% to 71.7M. With IDC also reporting of price pressure, revenue declines might be larger.
- IDC: [T]he Q1 market faced multiple headwinds – including inventory build-up of Windows Bing based notebooks, commercial slow down following the [Windows] XP refresh and constrained demand in many regions due to currency fluctuations and unfavorable economic indicators." Gartner thinks sales of "mobile PCs" (notebooks, convertibles, and Windows tablets) rose, while desktop sales fell sharply. "PC replacements will be driven by thin and light notebooks with tablet functionality."
- Both Gartner and IDC report U.S. PC shipments fell only ~1% Y/Y. On the other hand, IDC thinks Japan (another high-ASP market) saw shipments fall 44%; strong Q1 2014 spending prior to a tax hike made for tough comps.
- Market leaders Lenovo (OTCPK:LNVGY) and HP (NYSE:HPQ) continued taking share from firms with less scale: IDC estimates Lenovo's share rose to 19.6% from 17.6% a year ago (3.4% unit growth), and HP's to 19% from 17.1% (3.3% unit growth).
- #3 Dell's share rose to 13.5% from 13.4%; #4 Asus (OTC:ASUUY) was flat at 7.1%, and #5 Acer (OTC:ASIYF) rose to 7% from 6.3%. Everyone else collectively fell to 33.9% from 38.4%.
- Unlike in Q4 and Q3 (seasonally stronger quarters for the company), Apple (NASDAQ:AAPL) wasn't in the global top-5. IDC estimates the company's US. unit share rose to 10.9% from 10.6%, good for fourth place (revenue share is higher).
- Other PC industry names: MSFT, AMD, NVDA, MU, STX, WDC, HTCH
Mon, Apr. 6, 12:43 PM
- Following the 20%+ plunge seen in response to the company's Q1/2015 warning, SanDisk (NASDAQ:SNDK) is trading 40% below its replacement value (as measured in terms of fabs, royalty revenue, and cash), estimates Bernstein's Mark Newman. That, in turn, leads him to call the NAND flash giant a compelling buyout target.
- Newman adds there's "growing unrest" among SanDisk investors over its current valuation, and considers the company an "obvious" target for activists. His list of potential suitors includes NAND rivals Micron and SK Hynix, and hard drive giants Seagate and Western Digital.
- Of note: Antitrust regulators would closely vet a Micron or Hynix acquisition, given the potential pricing impact of further NAND consolidation. And Seagate recently formed a NAND alliance with Micron.
- Susquehanna also argues today SanDisk makes for a good buyout target, but focuses specifically on Western Digital (WDC +0.1%). The firm argues an acquisition of SanDisk by Western, which has already made a string of flash-related purchases (all enterprise-related) to protect its flank as SSDs continue encroaching on hard drives, would be accretive for Western in year 2 even at a 35% premium.
Fri, Mar. 13, 3:21 AM
- In the latest sign of weakening demand for personal computers, International Data Corp. predicts global shipments of PCs will decline 4.9% this year to 293.1M units, a bigger drop than its previous guidance for a 3.3% decrease.
- According to market research firm, the PC market declined 0.8% to $201B last year and is expected to drop an additional 6.9% in 2015, with smaller declines in coming years, reducing the market to $175B by 2019.
- Previously: Intel -4.1% on Q1 warning; other PC industry names also fall (Mar. 12 2015)
- Related stocks: OTC:ASIYF, AMD, HPQ, INTC, OTCPK:LNVGY, MSFT, MU, NVDA, SNE, STX, OTCPK:TOSYY, WDC
Thu, Mar. 12, 9:17 AM
- Intel (NASDAQ:INTC) now expects Q1 revenue of $12.5B-$13.1B, below prior guidance of $13.2B-$14.2B and a $13.7B consensus. Gross margin guidance remains at 60% (+/- 2%), with lower volumes offset by higher ASPs.
- "All other expectations" have been withdrawn - that presumably includes full-year guidance for mid-single digit revenue growth. Guidance will be updated during Intel's April 14 Q1 report.
- The chip giant blames the warning on "weaker than expected demand for business desktop PCs and lower than expected inventory levels across the PC supply chain." In particular, it thinks "lower than expected Windows XP* refresh in small and medium business and increasingly challenging macroeconomic and currency conditions, particularly in Europe," are taking a toll on sales. Server CPU division sales are "meeting expectations."
- Other PC-exposed names are following Intel lower: Microsoft (NASDAQ:MSFT) -2.4% premarket, AMD -2.8%, Nvidia (NASDAQ:NVDA) -2.5%, HP (NYSE:HPQ) -2.3%, Seagate (NASDAQ:STX) -2.5%, Western Digital (NASDAQ:WDC) -2.7%, Micron (NASDAQ:MU) -3.6%.
- Update (11:35AM ET): While Intel is still down over 4%, Micron and Seagate have turned positive, and HP is close to breakeven. Microsoft, Nvidia, and Western Digital have pared their losses, but remain lower.
Wed, Mar. 11, 12:22 PM| Wed, Mar. 11, 12:22 PM | Comment!
Sat, Mar. 7, 3:26 PM
- With Intel's (NASDAQ:INTC) Grantley Xeon CPU launch and Web data center investments offsetting weak high-end server demand, IDC estimates global server revenue rose 1.9% Y/Y in Q4 to $14.5B, and Gartner estimates it rose 2.2% to $14B; those figures compares with Q3 growth estimates of 4.8% and 1.7%, respectively.
- Likewise, IDC estimates global enterprise storage revenue rose 7.2% Y/Y in Q4, aided by Web investments and healthy demand for mid-range systems featuring integrated flash. Q3 growth was pegged at 5.1%.
- IBM had a rough time its both the server and storage markets: IDC believes its storage share fell to 9% (tied for #3) from 12.7% a year earlier, and Gartner estimates its server revenue fell 14% if one excludes Big Blue's x86 server unit, which was just sold to Lenovo. After accounting for the x86 sale, IDC estimates IBM's server share was at 13.7% (#3) vs. 26.8% a year ago.
- HP (NYSE:HPQ) fared a little better: IDC has its server share falling fractionally to 26.8% (still #1 overall), and its storage share falling to 13.8% (#2) from 14.1%. The company's x86 server unit has been gaining ground against IBM's former business, but its high-end server sales remain weak.
- Cisco's (NASDAQ:CSCO) UCS server line (recently refreshed) continues to gain ground: Its share rose to 5.3% (#5) from 4.5%, with full-year revenue pegged at $2.9B. With the help of aggressive pricing and x86 growth, Dell's server share rose to 16.7% (#2) from 15.2%, while its storage share slipped to 9% (tied for #3) from 9.2%. Lenovo (OTCPK:LNVGY) claimed a 7.6% server share (#4) thanks to the IBM deal, kicking Oracle (NYSE:ORCL) out of the top-5 along the way.
- EMC, whose high-end storage sales have been pressured (mid-range/flash demand has been better), saw its storage share drop to 22.2% (still #1) from 23.1%. NetApp (NASDAQ:NTAP), which posted an FQ3 miss and light guidance last month amid tough mid-range competition from EMC and others, saw its share drop to 7.2% (#5) from 8%.
- Not surprisingly, the white-label hardware beloved by Google, Facebook, Amazon, etc. continued to take share. IDC estimates such hardware, referred to as ODM Direct, claimed server and storage shares of 8.2% and 12.8% vs. 6.4% and 9.9% a year ago.
- Sales of x86 servers, the lion's share of which run on Intel CPUs, rose 7.1% to $11.5B. Sales of non-x86 servers fell 14% to $3B, thanks to declining demand for both mainframes and UNIX servers running proprietary RISC CPUs. "Early-stage revenue" was seen for ARM (NASDAQ:ARMH) servers, largely via HP's Moonshot line.
- Other companies with strong server and/or storage exposure: STX, WDC, SMCI, MLNX, AVGO, QLGC, RHT
Tue, Mar. 3, 12:39 PM
- BofA/Merrill's Wamsi Mohan has reinstated coverage on Seagate (STX -5.4%) with an Underperform rating and $50 target, and on Western Digital (WDC -3.3%) with a Neutral rating and $117 target.
- Mohan is worried Q1 and Q2 hard drive demand (i.e. TAM) is tracking below expectations. With regards to Seagate, he's also worried about its relatively high PC exposure (especially for business PCs), SSD cannibalization risk in both the client and (high-margin) performance hard drive segments, and potential conflicts with OEM customers from Seagate's systems business (stems from the Xyratex acquisition).
- Though worried about Western's exposure to the same TAM issues as Seagate, Mohan is relatively positive on the company due to its "solid" SSD position (partly the result of acquisitions) and strength in the growing high-capacity enterprise drive segment (boosted by demand from Internet giants).
- Top hard drive/SSD controller supplier Marvell (MRVL -2.1%) is following Seagate/Western lower, as is hard drive assembly supplier Hutchison (HTCH -1.7%). The Nasdaq is down 0.9%.
- Marvell's decline comes as the company reveals a Release 10 4G modem at the Mobile World Congress (competes with chips from Qualcomm, Intel, and others), as well as a partnership with Google to support the Web giant's Ara modular phone project.
- Earlier: Western Digital buys object storage software firm
Tue, Mar. 3, 11:12 AM
- Western Digital's (WDC -2.5%) HGST unit (formerly Hitachi's hard drive division) is acquiring Amplidata, a provider of software for managing object storage deployments within data centers. Terms are undisclosed.
- Amplidata argues its software, which is sold to enterprises, service providers, and OEMs, offers unmatched data reliability and durability, and can scale infinitely as more nodes are added. Demand for object storage solutions has been outpacing broader storage growth, as enterprises increasingly rely on them to handle unstructured data (documents, e-mails, videos, etc.).
- HGST already relies on Amplidata's software to help power its Active Archive storage systems, and says the deal "supports the company's strategy to expand into higher value data storage platforms and systems." It follows HGST's December acquisition of flash storage array vendor Skyera.
- Of note: Though having a sizable Silicon Valley presence, Amplidata is incorporated in Belgium. Thus, Western is likely using offshore cash to pay for the acquisition.
Western Digital Corp is a developer, manufacturer and provider of data storage solutions that enable consumers, businesses, governments & other organizations to create, manage, experience & preserve digital content. Its products include HDDs and SSDs.
Other News & PR